Equity Release Jargon Buster

Are you feeling a bit overwhelmed by all the words and phrases used in relation to equity release? Our jargon buster could help!

Compound Interest – Also known as roll up, this is interest that is added and paid on interest that is accrued on a loan such as a lifetime mortgage.

Downsizing – When you sell your current home in order to move into a smaller property

Drawdown – A lifetime mortgage where you release an initial lump sum with the option the release further funds in the future.

Early Repayment Charge – Should you wish to repay all or some of your lifetime mortgage you may be required to pay an early repayment.

Enhanced Plans – A lifetime mortgage whereby your health and lifestyle are taken into account in order to provide preferential LTV’s and interest rates.

Equity – The capital you currently have invested in your home, less any outstanding loans or mortgages secured against your property.

Equity Release – A product that allows individuals aged 55 and over to release money from the property they live in without having to make any monthly repayments.

Equity Release CouncilThe Equity Release Council was setup to ensure that customers are offered the best protection. The Council created a statement of principles that all member must adhere to and product standards with many lenders following.

Estate – The money and property value combined after a person has passed away, less any deductions such as taxes and debt.

Fixed Interest Rates – An unchanging rate charged on a liability such as a loan or mortgage.

Variable Interest Rates – A fluctuation rate on a liability such as a loan or mortgage that changes over time because it is based on an underlying benchmark interest rate of index that changes periodically.

Home Reversion Plan – A plan where you sell part or all your property at less than its market value in return for a tax-free lump sum, regular income or both. You are allowed to remain in your home as a tenant without the requirement to pay rent.

KFI (Key Facts Illustration) – A Key Fact Illustration will include important product details such as interest rates, mortgage term, fees and risks to name a few. You must be provided with a Key Facts Illustration when recommended an Equity Release product by a financial advisor.

Lasting Power of Attorney – A legal document that allows an individual (donor) to appoint one or more people (attorneys) to help make decisions or in the event that the individual (donor) loses mental capacity, to make decisions on their behalf. It can be registered for health and welfare, property and financial affairs or both.

Lifetime Mortgage – A plan where you are able to take out a loan secured on your home which does not need to be repaid until you pass away or go into long term care.

LTV (Loan to Value) – The size of a loan in comparison to the value of your property that has been expressed as a percentage.

Lump Sum

Means Tested Benefits – Additional income available to individuals where income/capital is below government limits.

MER

No Negative Equity Guarantee – A guarantee that ensures you can never owe more that the value of your home. This only applies to Equity Release Council approved plans.

Valuation – The process of getting an estimate of the worth of your home from a qualified valuer.

Waiver of Occupancy – A lender will require that a deed of consent is signed by any adult occupant aged over 17 who does not own but lives in a property where a mortgage is due to be secured against. The deed effectively suspends any legal interest the adult occupant may have in the property whilst there is a legal charge over it in favour of the lender.

Whole of Market – John Lamb LLP are able to source products from the whole equity release market in order to ensure that you are recommended the most suitable product to meet your objectives.